Policy leadership, transparency, integrated dev framework will upheld economy : Dr. Debapriya
Dhaka July 21 2022 :
The Finance Ministry should consider availing loans from International Monetary Fund (IMF) to balance the loan repayment pressure and keep investment flowing towards the country’s economy during the fiscal 2024 – 2026.
During the fiscal 2024 – 2026, lenders are expecting to be repaid, who invested heavily in different mega projects during fiscal 2014 -2018. Considering global macro economic trends it will be feasible for going IMF loan facilities to absorb the looming balance of payment shock in the local; economy.
Russia, China, Japan are key lenders who financed different mega projects of the country. The Government should recalculate, reschedule and reassess those loans through extending payback periods considering long and midterm micro economic situation of Bangladesh economy.
Different mega projects were financed by Russia 35 per cent, Japan 34 per cent and China 26 per cent and other donors did the rest 5 per cent.
95 per cent of mega projects loans will be repayable during fiscal 2024 -2026. So the government now must consider the repayment plans and develop shock absorbing capacity, strategies.
Lending from IMF will not only support our economy with money only, IMF intimacy will also avail other financial facilities, higher reputations for financers, private investments and direct foreign investments.
In the long and midterm, so IFM loans will not only support the economy to sustain but attract more investment for development sustainable.
Moreover, considering the global macro economic trends, the government must consider mega projects efficiency and effectiveness. To be cost saving and efficient government have to reschedule and restructure spending on mega projects.
Government must eliminate corruption in mega projects implementation stages which is burdening the projects with higher public expenditure. Lack of transparency, implementation inefficiency and policy leadership from finance and planning department are lengthening timeline, process and procedure.
It is high time to check corruption, save projects cost and expenditure with appropriate monitoring and policy leadership.
During fiscal 2024-2026, as large repayment off loans will be repaid, considering the current global economic crises, the government can reschedule payment schedule, extent repayment period and lessen risk and pressure in the internal economy.
Policy leadership, planning, projection and implementation need more attention from the government for sustaining benefits from the mega projects undertaken. The end users who are grass-root people need to get benefits from those development projects with diversified economic development.
In reality, lack of coordination among vision and implementation of mega projects are developing challenges among social development components.
Policy framework, proper planning, adequate implementation, transparency, accuracy and accountability need to address by the Government for availing mega projects benefits to the end users and attain sustainable development.
Keeping market under control, with enough monetary flow, attaining more internal income, acquiring more tax with expansion of tax net, inflation management, attracting more foreign currency, stable remittance flow, keeping higher balance of payment and increase private investment in the economy with higher employment will be the key challenges government will face in the upcoming fiscal.
So, it’s high time to develop policy leadership, assure transparency, eliminate less important mega projects, keep a pause in the planned mega projects which have to financed yet, save costs of running mega projects and attract IMF for finance will help to absorb loan repayment shocks in the economy.
Moreover, 70 per cent mega projects are road and infrastructure related projects which are related with Road-Bridge, tunnel contraction. The Roads and Highways department mega projects have attracted allocation of about $70 billion is lacking implementation capacity in the fiscal time line. Capacity development of Roads and Highways department is essential.
These projections were made by Dr. Debapriya Bhattacharya, Distinguished Fellow, Centre for Policy Dialogue (CPD) during a virtual discussion with media titled ‘Top Twenty Mega Projects in Bangladesh: Trends and Status‘ on Thursday.
According the key note presentation, Dr. Debapriya Bhattacharya highlighted that in the last decade (2009-2021) Bangladesh opted for a big push in public sector investment in the infrastructure projects based on foreign financing.
Most of the projects have been initiated in the period 2014-2018, between two national elections.
Sectoral orientation of this big push was majorly physical infrastructure (communication and energy) projects, with marginal investments in mega social projects (health and education).
Global experience suggests lack of quality feasibility studies, coordination failure, implementation challenges (corruption, cost and time overrun) as well as macroeconomic weaknesses led to failure of many mega projects causing huge economic loss in developing countries.
The think tank mentioned lack of transparency and accountability deficit along with delay in implementation shortfall has ultimately affected the reserve balance – both domestic and external.
All these potential threats are relevant for Bangladesh in the context of the status of the megaprojects.
Review of terms and conditions of foreign loans for the top twenty mega projects are favorable as there are a good number of concessional loans along with grants. But the total investments of the mega projects may be constrained by the delivery capacity of the concerned institutions.
Bangladesh needs to be wary of the debt situation as well, since it may become somewhat tricky in 2024-2026 as the repayment schedule for many of the high value loans will kick off around that time.
There is a need of defining a repayment strategy including rescheduling of imminent payments given the current account and foreign reserve status.
Very close monitoring will be paramount to keep the debt situation in check.
It seems that the mega projects have come at an expense of fiscal allocations for social sectors (i.e. health, education and social protection). This trade-off has become more acute in the context of stagnation tax-GDP ratio.
Academics, development thinkers and different media representatives of Bangladesh took part in the conversation with Dr. Debapriya Bhattacharya.